Twitter Cracks Down on Third-Party Ads

In April, Twitter began selling "promoted tweets," little ads among those ubiquitous, 140-character messages. Brands—including Starbucks (SBUX) and Best Buy (BBY)—post ads that appear if users search for certain terms on the site. If someone enters "Red Bull" in the search box on Twitter.com, a paid tweet from the beverage maker may appear among that person's messages from other users. The advertising is crucial to the four-year-old site, which attracted 110 million users before it had fully articulated a business model.

Recently a raft of websites and mobile-phone apps—from Seesmic and TweetDeck, to name two—have cropped up to consolidate tweets with streams of messages from Facebook, LinkedIn, and other social networks. Twitter's position on this proliferation of third-party sites and apps has been benign. Until now.

On May 24, Twitter declared that companies using its material may put ads above, below, and around the tweets—but not among them. In other words, that advertising venue is reserved for Twitter itself. Dick Costolo, Twitter's operating chief, wrote in a post on the company blog that paid tweets on other sites could hinder efforts at "innovating or creating the best user experience." Says Twitter spokeswoman Carolyn Penner: "We're working with companies in the ecosystem to help them understand the policy."

What set Twitter off was that some third-party operators started selling ads among tweets that appear on their sites. Startups such as Ad.ly and Izea emerged as brokers for these paid tweets.

That policy will force developers of the third-party sites and mobile apps to diversify. "It would be really dangerous to be only relying on Twitter," says Loic Le Meur, chief executive officer of Seesmic. While Seesmic now gets about two-thirds of its content from Twitter, Le Meur says that number will drop to one-third as he pulls other social networks into the fold.

Tech companies have tangled with members of their ecosystems before. Apple (AAPL) has refused to allow some of Adobe's (ADBE) software to work on the iPhone and iPad. Facebook has had a tense relationship with gamemakers like Zynga. Then again, Adobe and Zynga are powerful companies in their own right. No one in Twitter's world has much negotiating power, says John Malloy, co-founder of BlueRun Ventures and an investor in Facebook and Twitter developers. "There's nobody to stand up to them," he says. "And they know it."

The bottom line: Twitter, which has fostered a world of compatible apps and websites, is asserting control over how ads get mixed in with tweets.